With the discussion from the previous section in mind, this section aims to answer RQ2, how these adopted CE strategies are affecting the transport service providers’ value chains.
The SC can be affected in different ways which is further discussed in this section. All actors in a SC are linked together. According to Christopher (1992), the definition of a SC is related to the network of all the participating organizations, where producing and delivering a service to the customer includes both the upstream and downstream flow. This indicate that if one of the actors in the network changes their strategy, it will affect the rest in the network as well. This is also the case when designing a CE. As presented in the literature review, the fourth fundamental characteristic of the CE is that it needs to be thought of in systems. This means that all actors in the system are linked closely together and will therefore be affected by each other's actions (Ghisellini, Cialani, and Ulgiati 2016). This indicate that when Helthjem’s customers are changing their BM to include more CE strategies, it most likely will affect Helthjem’s SC and BM. According to Planing (2015), BMI is an important building block in the transition to a CE. Still, to realize how Helthjem is affected, it is important to know how the different actors design their SC.
The interviewed customers and Helthjem all have different designed SCs. Finn.no and Helthjem have a typical SOSC, as they both offer a service as the output for the customer and no physical products. Finn.no offers a platform for reuse, while Helthjem offers a transport service. Red Cross’ SC may be categorized as a PSSC (Wang et al. 2015). They offer both products and services, but to different customers. The donation bins and home-collection service are services offered to private consumers, and the donated clothes are then sold as products to international customers. Greenphones and Bergans also have a typical PSSC because they have a combination of services and products (Wang et al. 2015). Their
SCs have increased the number of added services through servitization where they offer the customer a mix of tangible products and intangible services. By offering the buy-back program, Greenphones retains the ownership of the products at the end of their lifetime, and add services such as maintenance and repair to prolong the life of the mobile phone (De Angelis, Howard, and Miemczyk 2018, Tukker and Tischner 2006). This also concerns Bergans, who offer rental services of kids’ snowsuits.
The customers´ SCs can most likely affect Helthjem. For instance, volume growth was mentioned by all customers as a likely consequence of their transition into a CE. How this volume growth emerges may be illustrated by considering the benefits a PSSC offers the consumers, and how this again could affect Helthjem’s volumes. The integration between products and services has three prominent benefits (Rogelio and Robert 2003):
(1) Designing products with long life cycles might provide economic benefits as it often provides a higher revenue. This is because products with long life cycles typically require additional services, such as maintenance and repair, and services have an overall higher profit margin than products (Anderson, Fornell, and Rust 1997). For instance, as Bergans are designing long-lasting products with high-quality materials, they also offer services such as repair to prolong the lifetime even more. This might affect Helthjem by leading to a volume growth, because more products need these services.
(2) The increased demand for services that occur is also a benefit offered by PSSCs. For example, the fact that Bergans produces more robust and sustainable products by using high-quality materials makes the products more complex and expensive. This increases the demand of additional services by private consumers to ensure the right performance of the products, such as maintenance (Kumar, Markeset, and Kumar 2004). Also, when products become more expensive, the consumers’ willingness to pay for repair services probably increase, as it is too expensive to throw the products away and buy new ones if they break.
Furthermore, rented products often need services such as inspection, maintenance, and repair between each rental period. This may affect the SC of Helthjem by needing to transport more products that require such services.
(3) Finally, the last benefit of PSSC is competitive advantage. This is based on the fact that services often are more challenging to imitate by competitors than products (Sasser, Schlesinger, and Heskett 1997). When the customer implements services that are difficult to imitate, this increases the requirements for customization and uncertainty of Helthjem´s SC,
as they need to be able to adapt to the change in demand for transportation it might cause.
This change in demand might result in increased volumes in their SC.
To fully utilize these benefits with a PSSC, cooperation and partnerships might be beneficial.
The findings show that all four customers believe that Helthjem need to create new and appropriate partnerships to be able to improve their services. For instance, Greenphones mentioned that Helthjem needed to enter partnerships with grocery stores, gas stations and kiosks to establish pick up points. This is in accordance with the literature presented from Haihong and Nan (2010), which states that a key to deliver appropriate services to the customers in the service SC are to select capable service providers to perform the services.
By selecting appropriate partnerships, Helthjem may be able to meet their customers’
demands. In order to be able to make the right decisions it is increasingly important for Helthjem to know their customers. Direct and frequent contact will make Helthjem more prepared for the future and the probability to succeed is higher. For example, the customers’
thoughts about trends are important insights, as it indicates what will influence their BMs the coming years. To establish important partnerships and capture the customers, Greenphones argued that Helthjem also needs to adopt more personalized services, as their different customers will require different services corresponding to their adopted CE strategies. According to Cho et al. (2012), service performance is key in achieving efficiency in the service SC. Therefore, to achieve efficiency Helthjem needs to perform their service according to their customers’ requirements.
By the same token, Finn.no believed that Helthjem will need to enter partnerships to be able to transport larger shipments. This means that the SC of Helthjem need to change into an integrated approach, where they cooperate with capable service providers to perform the demanded service (Sakhuja and Jain 2012). This means that Helthjem can outsource this function, which according to Chopra and Meindl (2016) is beneficial if the third-party can increase the surplus in the SC without causing a significant risk. Discussing the fact that Helthjem should enter partnerships also raises the issue of operating in clusters. According to Slavova and Bankova (2017), the cluster approach is effective to achieve sustainability goals. By cooperating with neighboring companies, Helthjem can increase their innovation, reduce the complexity in implementing sustainable solutions, make synergies by adopting complementing initiatives and improve their capabilities. For instance, both DHL (2016)
and Helthjem discussed establishing P2P drop-off networks, which is a centralized location where circular services are performed. Helthjem believed that this should be established in cooperation with other companies, in order to ensure that they can keep focusing on their core business and facilitate for their customers’ circular strategies. In order to establish important partnerships and cooperate with customers, establishing a strong brand in the market is an important contributor. As shown in the result, both Bergans and Greenphones believed that Helthjem would strengthen their brand and reputation among consumers by associating themselves with circular companies. This complies with the literature presented by Park, Sarkis, and Wu (2010), who found that the implementation of CE and GSCM provides companies with value creation, such as an improvement of their reputation.
Even though all of Helthjem’s customers most likely will affect their SC, some might have a bigger influence than others. For instance, both Red Cross and Bergans only uses Helthjem in their pilot projects and are using other transport service providers in the rest of their SC.
However, Bergans is planning on expanding their CE strategies, such as selling used products and providing rent services at their web page, as well as making their repair services more accessible. This represents a potential for Helthjem, as Bergans explained that the consumers that tested the subscription service was satisfied with the service offered by Helthjem. According to Sakhuja and Jain (2012), to deliver appropriate services to the customer it is important to select capable service providers to perform the service. Therefore, Bergans might decide to expand their relationship with Helthjem when adopting new strategies, as they already know that consumers are satisfied with Helhjem´s services.
Hence, Helthjem might want to adapt to these new CBMs and show that they are a natural choice when selecting who should perform the freight services.
Both Finn.no and Greenphones have included Helthjem in a larger portion of their SC.
Finn.no has chosen Helthjem to be their official transport service provider by offering them as an option at their platform, while Greenphones was planning for Helthjem to transport all their sold phones to consumers and companies. The relationship with Finn.no is well-established, as they have been a customer of Helthjem for four years. By having this close relationship, Finn.no probably has an influence on Helthjem. Additionally, they both are owned by Schibsted, which might make it even easier to cooperate and influence each other.
As Greenphones is a new customer of Helthjem, their relationship is not as well-established
yet. Still, Greenphones has several ideas that could be realized through a partnership, such as implementing a zero-waste strategy in the packaging. According to Orzan et al. (2018), adopting sustainable packaging is both beneficial for the environment and provide companies with a competitive advantage, which implies that Helthjem should consider this option for the future. Therefore, an option can be to explore this further through a pilot project. As argued by Slavova and Bankova (2017), cooperation might lead to innovation and implementation of sustainable solutions, and this might be the reality once a stable relationship has been established between Helthjem and Greenphones.
Even though Red Cross have included Helthjem only in the pilot project and are not planning on adopting any new CE strategies soon, their relationship is probably still important for Helthjem. As explained by the respondent at Helthjem, their cooperation through the pilot project have provided both parties with valuable insights. Therefore, keeping these types of relationships that enhance innovation is key when transitioning to a CE. As stated by the Ellen MacArthur Foundation (2014), BMI is crucial in order to mainstream the CE principles in B2B relationships. This means that even though some customers are smaller, newer, or provides less economic value than others, building close relationships that enhances cooperation and BMI is crucial in order to achieve a CBM. On that account, Helthjem should listen to all their customers’ inputs and adapt their SC to meet these requirements, if it is possible.
5.4 Challenges the Transport Service Providers Face
This section seeks to answer RQ3, thus, “What are the challenges Helthjem may face with a shift from a linear to circular SC among their customers?”. To discuss the challenges, the following sections will be structured into four main parts: economic, network, uncertainty and environmental challenges.
Economic Challenges
The economic considerations are a challenge mentioned by both Bergans and Red Cross. To make CE strategies valuable and possible, the first needed action is to prolong the life cycle of the products. This might be challenging, because it often results in increased costs (Sauvé, Bernard, and Sloan 2016). The respondent at Bergans mentioned this as two conflicting
goals in their BM, because they first and foremost are a company that sells new products to achieve a profit. Still, they want to contribute to the CE, but they have not yet been able to make all their circular solutions profitable. This dilemma result in an uncertainty related to what strategies the customer will adopt. Helthjem wants to facilitate for circular solutions, and therefore they need the customers to be willing to invest in these strategies. However, this might be challenging for some because their circular solutions are not yet profitable, and the overall goal for the company is to earn a profit (Chopra and Meindl 2016). For instance, Red Cross explained that repair is an expensive service that require large volumes to be profitable, and Bergans mentioned that the consumers´ expectations of free freight are a huge challenge to make these strategies valuable.
There is an inherent uncertainty related to if the CBM ever will be profitable. Guide, Harrison, and Van Wassenhove (2003) argued that some sustainable solutions never will be profitable, no matter how intelligent and innovative the BM is. On the other side, Linder and Williander (2017) argued that CBMs will help the companies to achieve cost savings, among other benefits such as reduced environmental impact. These statements point in opposite directions, which result in no common agreed upon recommendations for companies in the service sector for how the CBM will affect their business. Due to the conflicting literature, it might be difficult for Helthjem to decide to what extent they should invest in circular solutions.
Network Challenges
A challenge for Helthjem is to find the most appropriate balance between having the right capacities and capabilities to meet customer requirements, and at the same time reduce the number of resources in use. This was mentioned by Red Cross, who argued that Helthjem does not have the right capacity to handle the large volumes required to make circular services profitable. Having spare capacity and flexibility will according to Inigo and Blok (2019) decrease operational risk. Still, based on a lack of research and evidence of how CE strategies will affect the service SC, it might be difficult for Helthjem to know which capacities and capabilities that is the most appropriate. As stated by Helthjem, there is a challenge to know when to do the right investments. It can be crucial that Helthjem is proactive in order to avoid falling behind their competitors. To be able to deliver appropriate
services in this situation, they might need to use excess resources and capacity, which contradicts with the reduce principle (Ghisellini, Cialani, and Ulgiati 2016).
Our findings further indicate that the process of expanding their coverage might result in increased delivery times, especially in the northern part of Norway. Finn.no believed that this would be a challenge for Helthjem, because the predictability and efficiency to the northern part of Norway will be poor. Helthjem agreed that predictability is a problem to Northern Norway, as the infrastructure on this route is of poorer quality than other parts in the country and deliveries to these areas can take up to a week. On top of that, it is often harder to utilize the whole capacity of the trucks on the longer distances. Additionally, in the northern part of Norway, the consumers are more widespread than in the southern areas.
This makes it even more challenging for Helthjem to utilize the capacity because their BM is appropriate for just small and medium packages, not large ones. Even though most customers expect Helthjem to expand their coverage, Helthjem face split customer requirements. Our findings indicate that Finn.no wants Helthjem to expand their coverage, but on the other side they believe that this will have a negative effect on the environment.
This is because increased coverage means that even more consumers have access to consume resources, which increases the environmental footprint. This shows that it will be challenging for Helthjem to satisfy all the customers’ conflicting goals. This is a challenge related to the trend that SCs have become more complex (Abbasi 2012, Morana 2013).
Another network challenge might be the chosen time of delivery. Helthjem deliver and pick up their packages at night. This is beneficial for the carrier since they are avoiding large queues, thus reducing their emissions of GHGs. This is confirmed by Bhavesh and Chetan (2020), who argue that reducing for instance fuel consumption and delivery time during the day is efficient measures to implementing CE into freight companies. However, by practicing this time of delivery, Helthjem are facing some limitations, such as not being able to deliver all types of products. For instance, products that require the consumer to be present at the delivery, such as TVs and laundry machines from Finn.no, cannot be transported by the Helthjem carriers. The ability to transport all kind of reused products is important.
Diversity is a key in the transition into a CE, and one of the characteristics for CE (Ellen MacArthur Foundation 2015, Ulanowicz et al. 2009). Additionally, the time of delivery is challenging when implementing for instance the rent strategy. To make the rent strategy
valuable, the delivery and pick-up should be based on the consumers´ needs. Like the BM of Helthjem are structured today, the carriers are not able to pick up the rented products during the day. When a consumer’s rental period is finished, the product should quickly be inspected and cleaned before being rented to the next consumer. Therefore, the time aspect is a prerequisite to make the rent service profitable.
An important factor to make time of deliveries efficient is the reversed logistics. When transitioning from a linear to a circular model, there is a need to establish a return flow in addition to the regular flow in the SC (Eftestøl-Wilhelmsson, Sankari, and Bask 2019).
Helthjem have an established return network, the challenge is to get the consumer to use it in order to reduce the number of vehicles on the road, as well as to reduce the demand fluctuations. According to Östlin, Sundin, and Björkman (2009), one of the challenges with the CBM is the return flow where capacity planning is a struggling part. There is an inherent uncertainty in predictability and reliability in this flow, which makes it difficult for Helthjem to make it valuable. van der Valk (2015) found in his study that the reversed processes often are treated as a silo, which makes it difficult to achieve a holistic approach. A typical result of treating the reversed processes as a silo is an increased probability for failure of implementing CE (De Angelis, Howard, and Miemczyk 2018). Today's customers have increasingly high requirements (Yihsing Yang et al. 2013), where some of them is speed in their deliveries. This can be exemplified by considering the rent strategy, where speed is essential to be profitable. This is because the less time that is spent on transporting the products, the more they can be rented to consumers. This is confirmed by Bonev (2012), who explain that reversed logistics can increase customer support and help gain a competitive advantage, as well as ensure profitability.
Helthjem have an established return network, the challenge is to get the consumer to use it in order to reduce the number of vehicles on the road, as well as to reduce the demand fluctuations. According to Östlin, Sundin, and Björkman (2009), one of the challenges with the CBM is the return flow where capacity planning is a struggling part. There is an inherent uncertainty in predictability and reliability in this flow, which makes it difficult for Helthjem to make it valuable. van der Valk (2015) found in his study that the reversed processes often are treated as a silo, which makes it difficult to achieve a holistic approach. A typical result of treating the reversed processes as a silo is an increased probability for failure of implementing CE (De Angelis, Howard, and Miemczyk 2018). Today's customers have increasingly high requirements (Yihsing Yang et al. 2013), where some of them is speed in their deliveries. This can be exemplified by considering the rent strategy, where speed is essential to be profitable. This is because the less time that is spent on transporting the products, the more they can be rented to consumers. This is confirmed by Bonev (2012), who explain that reversed logistics can increase customer support and help gain a competitive advantage, as well as ensure profitability.